China's gamble to leapfrog world's car companies

The fast emerging Chinese car industry is looking to buy an existing Mexican plant and transform it back to China.

China's gamble to leapfrog world's car companies

20 February 2006Keith Bradsher in Chongqing

China is pursuing a novel way to catapult its car industry into a global force: buy one of the world's most sophisticated engine plants, take it apart, piece by piece, then transport it halfway round the globe and put it back together again at home.

The Chinese company Lifan Group and the Communist Party are bidding to buy a car engine plant in Brazil from DaimlerChrysler and BMW. Because the plant is so sophisticated, Lifan's president, Yin Mingshan, says it is far more feasible to move it, rather than develop the company's own technology in Chongqing, an industrial hub in central China.

If the purchase succeeds, China could outpace its competitors such as South Korea to catch up with Japan, Germany and the US in selling some of the most fuel-efficient yet comfortable cars on the market.

The failure of China to develop its own version of sophisticated, reliable engines has been the biggest technical obstacle facing Chinese car manufacturers as they modernise and prepare to export to the US and Europe.

Buying that technology from overseas would not only remove this obstacle but also plant China's car industry solidly in a position to produce roomy cars that are also fuel-efficient.

The engine plant is one of the most famous and unusual in the industry. Built in Brazil in the 1990s by a 50-50 joint venture of Chrysler and BMW, the Campo Largo factory combines the latest US and German technology to produce the 1.6-litre, 16-valve Tritec engine.

Lifan says it is the sole bidder for the factory and wants to bring it to China to start producing engines in 2008.

The bold moves are being driven by Mr Yin, 67, one of China's most successful and best politically connected entrepreneurs. He has set his sights on exporting to Europe in 2008 and the American market in 2009. Mr Yin said that while Lifan would pay for the factory, the Chinese negotiating team was being led not by a Lifan official but by a senior Communist Party official, Huang Zhendong.

Accustomed to producing lightweight, fuel-sipping cars for cost-conscious families, Chinese car manufacturers want to use that expertise as a competitive advantage while oil prices stay high.